National Financial Awareness Day: When to Create a Budget
There are times when you need a budget and there are times when you don’t. Here, at The Life Currency, we recommend a budget for anyone that is just starting out in life, changing jobs with a significant salary increase or decrease, or any other significant life changes. Also, if you are living paycheck to paycheck, like two thirds of Americans, you need a budget. However, a budget isn’t always necessary for every situation. Sometimes when we make a budget, we tend to spend unnecessarily. For example, if you set aside $200 for takeout every month but don’t reach that number towards the end of the month, you could frivolously spend on food you wouldn’t normally consume. And, let’s face it, creating a budget is time consuming and not fun. For the most part, you’ve earned your money and should be able to spend it as you see fit.
My longtime mentor gave me this advice about a decade ago and I have stuck to it ever since. You need a designated amount you will spend each month, but you don’t need to break it down into small categories. It doesn’t matter what your money goes towards as long as you don’t go over that number. This helps take the anxiety out of sticking to a strict budget and helps you enjoy the things you spend your money on.
The way we recommend keeping track of your spending is by only using a credit card for everything, and cash for services that absolutely call for it. This method takes a high level of financial discipline and a good memory. You will need to check your credit card account at least once a week and keep track of your spending in your head or on a spreadsheet or app. It’s also recommended that you pay off your statement balance each month and turn on automatic payments for that credit card. This is especially true if you are using a credit card that offers points or rewards. Those cards tend to have very high interest rates. If you let your balance roll over to the next month, you could end up paying hundreds of dollars in interest.
Another way to keep track of the total amount you want to spend each month is by taking that amount out of the bank and only spending cash. This is the least advised way to spend. It does not work if you frequently use cashless services such as ride shares, online shopping and grocery delivery. Also, carrying around a large wad of cash is never recommended.
If you absolutely feel the need to create a budget, we’ve created an example below (simply make a copy or download as an excel sheet to use for you). This sample budget is for a single person living in Washington, D.C. making $96,000 per year.
GRAB OUR BUDGET TEMPLATE HERE - make a copy and make it your own.