A Plan For Wealth

What do you think of when you hear the word budget? Does it sound tedious, restrictive, or annoying? Well, it shouldn’t. But if it does, let’s just change the name of it, shall we? Call It “My Plan to Save Thousands of Dollars”, “How I’m Going to Pay Off the House”, “The Game Plan to Achieve FIRE by 45” or “My Plan to be a Millionaire”.

Heck, call it “My Ultimate Plan to Be Super Wealthy Because I Want to Buy A  Frickin’ Tiger And Travel the World in my Private Jet Before The Grim Reaper Comes to Claim My Life.”

I really don’t care what you call it as long as you make the “plan” and stick with it.

A budget is liberating and not restricting like most will think. Even if you exceed your budget it is still important to have a budget laid out. Most importantly the budget will show you where you are spending too much and where you can cut back. The benefits of a budget far outweigh the annoyance of it.

To be honest, it is more fun now to see where we can cut back and save, it kinda becomes a little game.

Why Should I Budget?

Why Should you Exercise? Why Should you Diet (eat healthily)? Why Shouldn’t you Smoke?

Because they are beneficial to you! The things I have pointed out are all health-related (exercising more, eating more fruits or vegetables, decrease alcohol intake, etc.). They all have incredible health benefits. 

So Why is it so difficult to see the crucial benefit of making and sticking to a budget?

Maybe because we see wealth as a thing of Luck and not Hard Work.

Maybe because it takes a few months to tone up that bod, whereas building wealth can easily take over a decade to do so.

Whatever it is, it is important to know that a budget is as critical for building wealth as exercise/diet is to 6-pack abs.

Making a Budget

If you just moved or this is your first time watching your expenses, your first month should be like an experimental month. This is a trial and error time to get your numbers correct. This is what my wife and I had to do when we moved to our apartment. It was a new job, new place, new rent, new expenses so it ended up being a guessing game that first month.

Even though we were guessing, we got pretty dang close to everything… Except how much we would spend on gas for our car… That was much higher than we anticipated.

Income

The first thing you need to know is your income for that month. If you are living off loans take the amount you withdrew for the semester and divide it by the months you will be in school and use that number. Then from there, you can start making your budget.

Expenses

Second, would be looking at previous expenses from last month. This is to give you a rough idea what to put down. Start with fixed expenses such as rent, the amount you will save, amount you will put towards investments, car payments, student loans, parking, internet, and insurance.

Then after you have written your fixed expenses, write down the flexible ones like groceries, gas (car), going out to eat, etc. This will give you an idea of where your money is going and where you can alter it.

Adjust

Change it from month to month. A budget doesn’t work if you make one budget and don’t change it for the next month. Every month will be different. During winter you can expect your gas and electric bill to increase so prepare for that, or your car might be due for an oil change.

You may need to calculate certain expenses in your budget that weren’t there the previous month.

Another reason to adjust your budget is if you happen to overspend in one area. If for some reason a tire pops and needs to be replaced car expenses will increase that month.

You will have to cut expenses from somewhere else so that you don’t go over your budget.

Leftover Cash

Any money left over does not mean you can spend it on what you want. Fun expenses should be calculated in your budget. With any money left over, you should either save it, invest it, put it towards debts, or as a student, pay it towards that interest that is accruing. If we have any money left over I put it towards our retirement accounts… sadly this does not occur often while in dental school.

Look At The Plan

Lastly, follow up. Please don’t make a budget and forget about it. Be diligent with this and watch your spending throughout the month. This can be fairly difficult to do if you are doing it by yourself. This is why I use an app to remind me to look at my current expenses.

You Should Use An App

The most annoying thing about budgeting is keeping track of your income and your expenditures. I tried this, I would keep receipts, look up spending on my credit card and then manually input it into a spreadsheet.

This only lasted about 2 months for me. Then the lazy man inside of me stepped up to the plate and said stop this it is too much work. And well I stopped.

Now for me, this method didn’t work but for others, manually watching their expenses, it works great.

Because I am a lazy butt I decided to look for an app that would track these expenses for me. Then because I am cheap I wasn’t willing to purchase a money tracking app, I decided to go with Mint.

The best part of the app is that it does all this for you! Once you link up your accounts it will keep track of all your increase, purchases and bills and then show you your net at the end of each month. It is wonderful.

Now I use Mint just for my monthly budgets. For tracking my assets, investments and seeing my net worth I use Personal Capital.

Example Of My Budget

I have been using Mint to make my budget and track my spending for a while now. It has been just great for me and if you want to take a peek at it I went ahead and posted our budget for this month.

The only downside is I haven’t found a way to do percentages with Mint (granted I haven’t looked very hard). My wife and I pay 10% tithe of our income so…. that expense varies on our income… could be higher, or could be lower.

Stick To Your Budget!

Creating a budget is so useless if you don’t abide by it.

Making a budget, then sticking to it will initially feel tedious and restricting. People will even call you out on it and push you to break your budget.However, once you get into the habit of being frugal and checking your expenses regularly, you will see that you can prevent frivolous spending and be able to keep thousands in the bank.

Then before you know it, that budget that seemed so tedious and annoying, will make you a very wealthy individual.

[Side Note: This didn’t really fit in anywhere but I wanted to put it in. If you ever plan on owning and running your own business you need a budget. The business will surely fail if you do not have a strict and well-outlined budget for all your expenses. So now is an ideal time to practice living on a budget.]

4 Comments on “A Plan For Wealth”

  1. I am an anti budget fan FSD.

    Many people should and do use a budget. Personally though when I tried it I did not enjoy it. I have never been an over spender on my own so that may be part of it. When I put categories on everything I just started to feel like it sucked the fun out of life a bit.

    Instead I follow the approach to pay myself first. Then after this and bills are paid I spend the rest freely. I keep a close eye on things though so I tend to not fall in the category of spending to much before I have more cash coming in.

    For someone trying to get a grip on finances though a budget can work wonders.

    1. As long as you save like it is a bill to pay then live within your means you don’t need a budget. I was going to mention it somewhere in the post but didn’t want to throw off the momentum of why a budget is important.

      But yes your approach to saving and investing is perfect. Just need to find something that works well with your personality and stick with it.

      Just for those starting off though, as you mentioned, I think tracking your finances and actually seeing where your money goes is a great eye opener. Then after this they don’t have to make a budget but have a thought of “I need to spend less here”.

      -FSD

  2. I used Mint for a while through college and grad school and it is amazing to have it do all the work for you! Then we got even lazier and just stick to a “don’t spend unless we have to” way of thinking as our income expanded to much more comfortable levels. So we no longer “budget” but we do still track trends and totals to make sure we aren’t lifestyle inflating too much. I do think it’s important for those just starting out on their own to budget!

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