Like Julie Andrews says, let’s start at the very beginning.
It’s a very good place to start.
Most budgets take the form of a list. Whether it’s in a spreadsheet or just on a piece of paper, your expenses will show up in some sort of top-to-bottom fashion. To be a total budgeting boss, you have to get the order right, starting with the most important things at the top. Maybe that seems elementary. But I can’t tell you how many budgets I’ve looked at that are not set up this way.
Humans have a limited amount of willpower. Studies show that we succeed when we create the proper environment. We do not succeed when we have to constantly fight against our surroundings. It’s this science that resulted in a container of Nutella surviving an entire year in my pantry. Because it was in the back, hidden behind canned beans.
Just as out of sight is out of mind; top of sight is top of mind.
So, when we budget, we need to take care of what some people refer to as “the four walls” first. People sometimes like to try and get fancy with it. But just ask yourself the following questions and you should be good to go:
- What do I need to have effective shelter?
- What do I need to be able to work?
- What do I need to be properly fed?
- What do I need to remain clothed?
The answers to those questions are what go in the top section. Thankfully they should be the easiest expenses to isolate. For example, your mortgage payment, your electricity money, your gas money, your grocery money…those should be showing up here. These are NOT always your “bills”. I have plenty of bills that are not essential. Like life insurance, Netflix, or our counselor. None of those are essential to my continuing to eat, have shelter or get to work.
Make sense? Good.
Next time, we’ll go to section #2. Debt!