Let’s keep it simple with budgeting for a minute. Budgeting can be overwhelming, but that is NOT an excuse to ignore it.
G. S. S. = Give. Save. Spend.
Those are three broad categories that have several sub-categories. However, start with those three categories and set your target percentages or ratios for those three areas. This works for everyone because everyone makes the same amount of money: 100%. We all make 100% of what we make. The dollar amounts may be different, but if we all start at 100% then using ratios makes it very simple to set goals and track progress.
It is a good idea to begin with a goal of 10% Give / 10% Save / 80% Spend.
Here’s a tip: you can automate two of those three things each month. You can set up automatic transfers for giving and saving each month. DO IT.
If you make $5,000/month, then you can automatically give $500 (10%) and automatically save $500 (10%). The balance is $4,000. That is what you can spend.
Make sure you start with a target bank balance. If you establish that you never want your bank balance to fall below $5,000, then at the end of each month review where it is. If it is consistently above $5,000, increase your giving or saving. If it is falling below $5,000, do NOT decrease giving or saving. Rather, start digging into your sub-categories under Spend to try and determine why you can’t live off of 80% of your income.
Perhaps your debt payments are too high, or your housing costs are too high, or you like Chipotle too much. If you can’t make the 10/10/80 ratios work that’s when you need to get into the details.
Start simple. G. S. S. If you’ve never given before or saved before, begin with a goal of 1/1/98. Increase those first two numbers on a regularly scheduled basis. Pretty soon, you will be living on less, saving more, and all the while being more productive with your dollars.
FOCUS: What is your G.S.S.? Where would you like it to be?