#DollarWise : How to Do An Effective Budget

Many of you might know that I work in banking, and have done so for 10 years. Side note: last ten years flew by, I was supposed to work here for a year and go back to school and it never happened. Zahra and I both actually work in banking which got me thinking about how little we talk finances/banking on here and we have a lot of experience and expertise between the two of us that could be beneficial to you guys.

I know finances can be a touchy subject and it's approached very differently around the world but if I can share one resource, one tidbit of new information to help, I'll take the risk of being forward and having an honest and open conversation about money and finances.

I think that every financial talk should stem from a budget, so that’s where we start today. Building a budget is essential as it gives you an insight into your finances today, and makes it easier to plan for the future. Creating and sticking to a budget will help your long-term financial health.

There are apps like Mint that analyze  your spending and income and you can even create budgets – my issue with the app/electronic process is that it lacks accountability.  I use an Excel spreadsheet to do my budget and I update it on monthly basis. This way I have to look up things, write out my commitment and have been staying on top of it more versus when I used the app.

The spreadsheet I added here is what I use and has made a world of difference on how I approach money. I  was one of those people that easily got carried away and could spend way more than needed or necessary. Sitting down the first time to do a budget and looking at all my statements was horrifying - realizing that I spent $450 on coffee this month or $500 at Indigo buying books scared the crap out of me. Honestly, it was hard and made me wanna cry but it was the reality check I needed. Doing a budget has allowed me to look at where my money went, and how to refocus to achieve my goals.

While there are many tools and many ways to do a budget, basics are to start by listing your income and expenses and then compare the totals.  Remember to take into account all expenses. This can be challenging so try to think of anything and everything you spend money on – contributions to savings accounts, groceries and gas, Netflix subscriptions, and anything else in-between should be accounted for.

If your total expenses are higher than your total income – you’re spending above your means. Your budgeting goal is to always have income higher than expenses.

The spreadsheet I included (I didn't create it, someone at work gave to me) is fully interactive and the fields that are there are to serve as a reminder.  The top portion of the budget worksheet is important because you have to sit down and think of what you are trying to achieve. Breaking your goals into smaller monthly goals will help keep you accountable and hopefully one step closer to financial freedom. 

 If you are unable to open the spreadsheet, want an e-mailed copy, or ever want to chat about finances, feel free to e-mail me @ letterstoLALAland@gmail.com

How do you stay on track? Do you have a budget?