How To Budget Successfully
Budgeting is something I didn't learn in school, and I'm guessing you didn't either. Let's start now!
Budgeting is not something you typically learn in school, but it is a life skill that everyone needs to know and master. I will show you how I learned to budget as a kid and how I adapted it to my adult and entrepreneurial life.
In my house, we did not have allowances. My parents allowed us to live in their house and eat their food. So when it came to being inventive and making money we wanted to make sure we used it wisely. When I started my first business called Super Sitter, I started to understand budgeting a bit better. I needed to budget for materials, flyers, babysitter's certification, and spending money for myself.
And after a week-long adult seminar, I got the tools to help me physically see how to budget. I like to call it the "Wallet Method."
The Wallet Method
You can use anything to implement the Wallet Method - jars, boxes, envelopes, or just a graph. Use whatever tools you'd like, as long as it helps you. Originally I had it broken up into 5 categories.
- WealthThe Wealth wallet was for reinvesting into whatever I was doing. Whether it went toward flyers or putting gas in my car to get to my next client. I could also use it to start a business, invest in products I wanted to sell and so on.
- PlanThe Plan wallet was for things I wanted to buy in the future. So that awesome barbie jeep I bought at 4 years old, whether I knew it at the time or not I had saved up for it in my plan wallet. These funds are for your bigger items you would like to buy, doodads or business ventures count in this category. I usually keep it on 1 goal at a time and set a time limit for that goal so I can move on to another goal if it doesn't work out.
- LearnThe Learning wallet was for classes, books and other tools I needed for school. As I got older I needed books to learn about investing and real estate, calculus, and coding. I also took out-of-school classes at my local library. Learning is always important and should not be skipped over.
- FunAnd of course, I paid myself first. I put money aside for movies, theme parks, roller skating, toys, and junk food! Everyone needs some money they can just blow on activities they enjoy.
- CommunityThe Community wallet is for charity. My vending machine business raised money for the Children's Hospital. I enjoy giving back to the community in whatever way I can because not everyone is privileged with good health. And believe me, being a premature baby did have its drawbacks.
Now, as I got older, I added and removed wallets as needed. Here are a few examples of wallets I'm currently using.
- BillsThe Bills wallet was for monthly and recurring bills. That includes insurance, rent, water, electricity, gas, and my phone bill. It's important to know how much your bills are so you can set money aside from your total income, so by the end of the month you have more than enough to cover it.
- TaxesThe Taxes wallet is just for that; taxes. With this budgeting system in place, when taxes come around the next year you'll know where the money went, how it got there and how much you will need for taxes. I like to keep a little extra in this wallet so that when tax season comes I can get a tax return check.
- SavingsThe Savings wallet was started because, for a while, I was making a lot as a kid and I didn't need to spend all of my fun money, wealth, or learn money. I put it in my bank and let it grow over time.
My Budget Today
As of right now, my budget looks like this:
Bills - 30%
Wealth - 30%
Taxes - 17.5%
Fun - 5.625%
Savings - 5.625%
Plan - 5.625%
Angel - 5.625%
Your percentages always need to add up to 100%. You can also use a flow chart (see below) to help you with these calculations.
This is something I learned from Rich Dad Poor Dad for Teens. I highly recommend this book to anyone, at any age.