Here’s a piece of software that changed how I play my money game. There are stacks of books on how to think and behave with money. They’re great, but most people read the information, take it in and then don’t implement it. This is because there’s no system for you to feed your new knowledge into.
It's like having furniture but no house to put it in.
People have systems for everything except most people don't have a system for their money. This is one of the reasons why wealth is disproportionally distributed throughout the world. Without a system emotions are given room to run your money.
“If you cannot manage your emotions, you cannot manage your money.”
Without a system emotions are given room to run your money
A well-designed budget is your system for removing the emotion from your money and equips you with the on-going strategy for your dollars.
Something I frequently deal with as a mindset coach is people's financial situation (I'm not a registered financial advisor). When I ask my clients what their monthly expenses are, they don't really know. When I ask how long their savings will last if they stopped earning an income, I get the same response or a more worrying, "I don't have any savings."
Having a budget solves this problem. If you've got a running budget of your current expenses, then you're giving yourself a bird's eye view of your entire financial situation. This is important if you want to build your wealth. Having a bird's eye view is vital to every construction project. You need to see a lay of the land (what you have) to get an idea of what you can do and how far you can build. Then you've got a clearer idea of what you need to help you get you where you want to go.
Before I created a budget for myself, my money had no system to follow. The money would come into my life and roll out just as quickly. While I was getting paid weekly, I saw money run out before the next pay check would come in. I'd get paid on Thursdays and be lucky if there would still be money in my account by Monday evenings. It was like this for years before I learned the importance of running my budget.
Once I started running a budget, my money management started to transform. But I was still managing everything on spreadsheets which was hard to maintain. Also, it wasn't sexy. Things changed for me when I started using YNAB (it stands for You Need A Budget).
I finally had a system for my money and the day I started using it. I felt like I had total control over my money.
I felt like a captain of my financial ship, and the crew – my dollars – were finally following orders.
I recommend this software to all of my coaching clients. Why? Because they, like you, deserve to have a system to manage your money. Having a system and a strategy for your money makes it easier to deal with whatever underlying psychology and emotions that are driving your financial dependence.
It separates your emotions from your finances so that when your emotions arise, it's easier for you to deal with them. You'll be surprised how much shame, guilt, pride, fear and a sense of meaninglessness can drive your financial decisions. Think of how much shopping you do when you're bored or feeling like you need to buy something to make yourself feel better.
Along with other things, I'm here to help you develop greater self-awareness. That's vital if you want to understand and appreciate who you are. A budget brings self-awareness to your finances. That's because you're recording every single transaction.
(If you just sighed, cringed or tuned-out, then that's a sign that a budget is exactly what you need to get on-top of your finances).
At this point, most people decide recording every transaction is too hard or that it's overkill. Keep in mind that the only people who say that are the people who don't want to confront how they actually spend their money.
They don't want to see the facts of how they spend every single dollar. It's easier to hide the shame and guilt of how you spend your money when it's all lumped together into a 'living expenses' amount than confronting the detail.
Let me tell you from personal experience. You're not fooling anyone, not even yourself. The only reason you cringe when it's your turn to get next round of drinks is that you've been avoiding looking at how much you've been spending on being social.
To begin with, running a budget is going to be painful. That's because you're looking at how you're actually behaving with your money. It hurts big-time. But that pain is essential so you can reevaluate what your money does for you.
What a budget is and isn't
Creating a list of round-figured expenses is not a budget. That's a snapshot of your current expenses. It gives you an idea of where your money is roughly going. So yes, sit down and give yourself an idea of where exactly you're spending your money. But, that's not your budget. It's more like a snapshot or a financial forecast.
A budget is a framework that will empower your financial decisions. It will give you the hard data that will help you decide if what you're about to spend your hard-earned dollars on is truthfully valuable enough to say goodbye to them.
It's kind of like becoming aware of those friends who might be holding you back from going after your dreams because they're scared to do the same for themselves. Maybe it's time to find new friends, or perhaps you can make friends with your budget.
Your budget will never betray you. That's because it challenges you to be completely honest. Meaning, be accurate with your transactions, be clear about what your actual expenses are, and your budget will be very loyal to you. It'll even help you achieve some truly meaning goals in your life without having to use other people's money or credit.
Seriously, check out this software. If you choose not to use the software, at least go through YNAB's free content. They've got some great lessons and methods on how to manage a budget.
You'll get a free 34-day trial for signing up, and there's a mobile app that can be used to make on-the-go decisions. And, because you're using my referral, if you decide to continue with the subscription after the trial period, you'll get another month free. Click here to check out YNAB and get an additional free month.
One Last Note...
One last note on why having a budget is vital for the future of your financial wealth. I worked on money and wealth mindset before I started using the software, but I couldn't find a useful framework to put all of my money mindset and into play. It was like learning how to play football but never finding a field to play on.
My wife started running a budget for her already-well-managed money, and her finances have further stabilised and grown because she had a place to put it all into play.
Both of our earnings fluctuate throughout the year. Using YNAB along with our money mindset, helped stabilised our finances and therefore steady our headspace about other areas of life. Your budget can be your financial anchor when you feel like you're financially drifting through life's storms.
Some extra help...
This first video, made by YNAB themselves, takes you through their 4 rules around how to budget your money. These rules are important to inform your thinking about how to allocate your money in a strong way.
Best thing to do is start your trial and follow along with the video. Make sure you customise your budget categories to reflect your expenses -- the default options are there to help you get thinking.
This second video, also made by YNAB, gives you a clear idea of how the software works in terms of setting it up.
Best thing to do is start your trial and follow along with the video. Make sure you customise your budget categories to reflect your expenses -- the default options are there to help you get thinking about what your expenses are.
Now, go get your financial house in order!
Full disclosure – I get a free month of usage of YNAB for every person who pays for a subscription using any of the links above. You also get an extra month free for using this link. It's a win-win the way I see it. But if the link stops working, please google the term "YNAB". I've been recommending it long before I received a referral link. It's just a great piece of software. It puts you in control of your finances if you use it appropriately. And remember, I'm not a registered financial advisor in any state or territory. I'm simply recommending a product and service that I use and I think is valuable and useful.