Budgeting 101: From Getting Out of Debt and Tracking... (PDF) (2024)

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CONTENTSINTRODUCTIONCHAPTER 1: BUDGETING BASICSWHAT BUDGETING IS (AND ISN’T)USING YOUR BUDGET TO CREATE WEALTHSETTING YOUR FINANCIAL GOALSKNOW YOUR PRIORITIESTHREE MAIN STEPS FOR YOUR BUDGETTRACK AND MEASURE YOUR SUCCESSKEEP YOUR BUDGET FLEXIBLECHAPTER 2: KNOW WHERE YOUR FINANCES STANDTAKE AN HONEST LOOK AT YOUR SITUATIONASSESS YOUR ASSETSLIST YOUR LIABILITIESFIGURE OUT YOUR NET WORTHKNOW YOUR CASH FLOWTALLY YOUR INCOMETRACK YOUR SPENDINGCHAPTER 3: HOW TO CREATE A LIVABLE BUDGETTHE BASIC BUDGET EQUATIONTWO WAYS TO BALANCESAVING IS YOUR NUMBER ONE EXPENSESET YOUR SPENDING PRIORITIESSPEND LESS THAN YOU MAKESIDESTEP FINANCIAL QUICKSANDAVOID THESE COMMON MISTAKESCHAPTER 4: BUDGET MECHANICS

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FIND YOUR BUDGET PERSONALITYGO LOW-TECHDIY SPREADSHEETSSOFTWARE MAKES IT SIMPLEBUDGET ON THE GO WITH APPSAUTOMATE SAVINGS AND PAYMENTSCHAPTER 5: EASY WAYS TO INCREASE INCOME AND TRIMEXPENSESFOUR WAYS TO BOOST EARNINGSINCREASE CASH WITHOUT WORKING MOREKNOW YOUR SPENDING TRIGGERSWATCH OUT FOR BUDGET BUSTERSDOWNSIZE YOUR BIGGEST EXPENSESREDUCE EVERYDAY SPENDING WITHOUT FEELING DEPRIVEDCHAPTER 6: TAKE CHARGE OF YOUR DEBTRANK YOUR DEBTELIMINATE TOXIC DEBT AS FAST AS YOU CANPICK A PAYDOWN PLANWIPE OUT CREDIT CARD DEBTSHRINK YOUR STUDENT LOANSREFINANCE YOUR MORTGAGECHAPTER 7: BUDGET REBUILDING EVENTSYOUR FIRST JOBGETTING MARRIEDBUYING A HOUSEHAVING KIDSFINALLY DEBT-FREEGETTING DIVORCEDNEARING AND ENTERING RETIREMENTCHAPTER 8: DON’T LET EMERGENCIES DERAIL YOURPLANSBOUNCE BACK FROM FINANCIAL DISASTER

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CREATE AN EMERGENCY BUDGETKEEP INSURANCE TO PROTECT YOUR FINANCIAL FUTUREREBUILD SAVINGSREPAIR DAMAGED CREDITRETURN TO YOUR REGULAR BUDGETPHOTOGRAPHSABOUT THE AUTHORINDEX

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INTRODUCTIONIf the word budget makes you cringe, you’re reading the rightbook. Old-style personal financial advice equates budgetingwith constant expense tracking, deep cost-cutting (mostly of allthe fun stuff), and a lot of math. It sounds boring andfrustrating, and no one (including me) wants to do it.The truth is that budgeting doesn’t mean sacrifice; it meanschoice. A budget is a plan for your money that will let you takecontrol of your finances so that you can have all of the thingsthat you want, whatever they are. You can gear your budgettoward the life you want, whether that includes ironcladfinancial security, the freedom to ditch your job and travel theworld, or resources to buy your dream house and start a family.Budgeting is about designing a road map to financialsecurity and prosperity. Sometimes that path includes cuttingback on expenses (especially the ones that aren’t bringing youany benefits); other times it creates space for major lifechanges (like buying a house). It’s a way to tap into yourresources wisely and transform them into future wealth.More than all of that, it’s a way to take the anxiety out ofmoney management: instead of stressing over every bill thatcomes in, for example, you’ll already have figured out exactlyhow to pay it. You’ll have a plan for eliminating the debt that’sbeen keeping you up at night. You won’t have to worry aboutwhether or not you’ll have enough money to fund yourretirement. That financial confidence will help you overcomethe challenges that have been keeping you from getting aheadand accumulating a healthy nest egg.To get to the financial destination you want, though, youneed to know where you’re starting from. You’ll use thatinformation to set a course that will help you reach your goals.Your budget will act as the GPS, giving you directions and

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rerouting you when detours pop up so you can get whereveryou want to go.

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Chapter 1Budgeting BasicsMost people have the wrong idea about budgets. They thinkthey’re all about eating no-brand ramen noodles in the dark tosave money and keeping endlessly detailed records of everypenny spent. The real point of a budget is to make sure you’renever in a position where ramen noodles are all you can affordto eat or you’re praying your power doesn’t get shut offbecause you couldn’t pay the bill.In this chapter, we’ll expose budgeting myths, take a look atbudget reality, and reveal the best way to make thispersonalized money plan work for you. With this powerful tool,you’ll be able to build wealth, meet and exceed your goals, andbe ready whenever unexpected financial setbacks occur.

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WHAT BUDGETING IS (ANDISN’T)A Money Plan . . . Not a Magic PotionThe right budget is a game plan for your money that assignsspecific jobs to every dollar, whether that job is to pay theelectric bill, buy this week’s groceries, or beef up your 401(k)account. That plan helps you direct cash toward your financialgoals, from paying cash for your next car to funding adestination wedding to enjoying a stress-free retirement. Abudget lets you decide ahead of time what you want to do withyour money instead of spending randomly in ways thatundermine your plans and leave you with a mountain of debt.What budgeting won’t do is magically and instantly solve allof your money problems. It’s not a quick fix or a perfectformula. But with time and focus it can move you out of amonthly money crunch and toward financial freedom andprosperity.A Small Leather BagThe word budget comes to us from fifteenth-century France, where a bougette was alittle leather bag or pouch that was used to carry money (sort of like a wallet). After ahundred years or so, the word morphed into budget and began to refer to the moneyinside the pouch.Bottom line: a budget tailored to your life—as opposed toyour life tailored to a budget—can help you spend consciously,dig out of debt, and build substantial wealth.