Overcoming Debt, Achieving Financial Freedom

Chapter 5Choose the Best Budget for You

I lived off $24,000 per year in New York City during law school. Although I did not have an actual written budget, I did something that I call “budgeting lite,” which looked as follows:

• Rent: $1,150
• Utilities: $50
• Cable: $100
• Food: $250
• Transportation: $120

I simply listed my main bills and expenses. Because I was more focused on survival, I did not have an actual plan for my money. I did not have any clear financial goals nor was I consistently tracking my spending.

From my coaching experience, I have found that this “bill listing” method is what many people call their “budget.” This is straightforward and simple to create. It is also a great place to start if you have never budgeted. However, simply listing certain expenses often fails to accurately account for your discretionary and irregular expenses, fails to create a plan for any remaining or extra income that you may receive, and often overlooks financial goals such as saving, investing, and debt payoff.

What Is a Budget?

What comes to mind when you think of the word budget? Perhaps you think of the following:

• Restrictive, limiting
• Boring
• Time‐consuming

But a budget does not have to be any of those things.

A budget analyzes your income and expenses over a period of time, and allows you to plan for your financial goals. The key word to focus on is plan. Instead of wondering where your money went, you are going to tell it exactly where to go. A budget gives you permission to ...