When budgeting is done the wrong way, it’s stressful.
The wrong way: Most people break things down into too many categories. They budget for the wrong things or worse, they don’t budget for their true expenses. Why is it when every December rolls around so many people are stressed at having to spend so much on gifts? It’s because they haven’t properly saved that money each month through the year.
And if you’re thinking, I don’t make enough money to save each month. Well if that’s true you shouldn’t be buying gifts for people anyway. If you can’t save it each month, it’s not like December opens this magical chest of free money.
The right way: Take hard look at the money you make and ensure you don’t spend more than that amount in a given month. You have to be realistic about what you HAVE to spend money on (rent, bills, groceries, etc.), and ruthless about what you WANT to spend money on (eating out with friends, going to the movies, etc.)
The best lesson I ever learned was to set aside savings goals with targeted dates, i.e., getting a new computer (2 years from now), going on vacation (next summer), buying a house (in L.A.? probably like 20 years from now). Treat those goals as bills and pay them each month. It was a complete game changer. It focuses you on what’s realistic. You might think you can afford your new car next year but after running the numbers of what you’d have to save each month, you may realize it’ll take two years. It’s intimidating to sit down and do this but it’s absolutely necessary.
Even when I was a production assistant I managed to save money, despite having to make payments on my students loans. I didn’t save a ton, over the years that snowball grew larger and larger. The main problem is people just don’t know how to budget. It doesn’t have to involve complex formulas and Excel spreadsheets.
We all know someone who complains about various life problems but never does something to change their situation. Hopefully you’re not one of those people.
Things can be learned.
Read a book.
Take a class.
Here are two resources I’d recommend highly for anyone who (A) struggles to save money or keep a realistic budget or (B) those who want to be more effective and knowledgeable about how to best utilize their cash.
I Will Teach You To Be Rich is the book that got me out of my post-college debt. The author shows so simply how to create a system that works.
You Need a Budget (YNAB) has completely killed Mint for me. Mint was great at telling me what I DID with my money—YNAB is great at telling me what I’m GOING TO DO with my money.