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  • Do you ever feel stressed about money?

  • Unless you're a prince or a preschooler, you probably said yes.

  • For a lot of people, it always feels like there's not quite enough to go around.

  • You're constantly having to make tough decisions about what you can forego, and it never feels like you're really in control of your finances.

  • Well, when you need a bit of inspiration, look no further than the front of a one dollar bill.

  • I'm talking about this guy: George Washington.

  • Besides being the first president of the United States, General George Washington was the commander of the rag-tag Continental Army during the Revolutionary War.

  • He must've felt like he never had enough soldiers to go around, but by making a plan, he was able to lead that army to victory over the greatest fighting force in the world.

  • You can take a cue from George by becoming commander-in-chief of your finances.

  • Each one of these is a soldier in your army, and your battle plan is a budget.

  • I know, the word "budget" makes most people want to go AWOL.

  • In fact, according to a 2016 Gallup poll, only 32% of couples keep a written budget of any kind.

  • But if you were a soldier, would you want to follow a general who was making it up as he went along?

  • A lot of people tend to think of budgeting as prediction, estimating what you'll make in future months and how you'll want to spend it.

  • But the most effective budgets work exclusively with present dollars.

  • After all, you can't give orders to soldiers that don't exist!

  • So the size of your army is only how much money you currently have in your bank accounts.

  • And as general, your role is to give every last one of those soldiers a job to do.

  • So, if you have a total of $10,000 across all of your accounts, you need to decide how much of that you're going to spend this month and how much you're going to set aside for savings.

  • Before we can decide how much we want to spend, we need to know how much we're spending now.

  • Print out your last 3 months of bank statements, and put each expense into one of 5 categories.

  • Essentials.

  • These are the things you can't do without.

  • Rent, utilities, groceries, gas, car payments, health insurance.

  • Anything you need to live or do your job effectively.

  • Security.

  • These are expenses that increase your financial stability, like building emergency funds or paying off debts.

  • Don't double count credit cards in this category though!

  • If you use a card to buy groceries, that expense should go in "Essentials."

  • Goals.

  • This is money you set aside to achieve big life goals, like saving up to buy a house, starting your own business, or taking a special vacation.

  • Lifestyle.

  • These are expenses that help you navigate your social world.

  • Personal grooming and apparel, gifts for friends and family, gym memberships, even pet needs can go in here.

  • Discretionary.

  • This category is all about treating yourself.

  • Going out to dinner, renting a movie, buying a video game, or getting a massage.

  • Everyone has their own priorities, but think of this as a good battle plan template, with the most urgent needs at the top, and the more flexible ones towards the bottom.

  • Now that you know how much you generally spend on these categories, you can start assigning your soldiers to next month's duties.

  • Unless you're living paycheck to paycheck, you probably have some money left over--but don't let those soldiers just sit around!

  • Decide what you're saving them for.

  • Is it an emergency fund or a Hawaiian vacation?

  • Savings that have explicit purposes are a lot harder to steal from.

  • Congratulations!

  • You've made your first month's budget. Now how do you make it stick?

  • Number one: Write It Down.

  • You can use a spreadsheet, an app, or good old pencil and paper, but no general ever won a war by keeping all their strategy up here.

  • Number two: Update It.

  • Conditions on the ground will change, so restrategize at the beginning of every month, and you'll have new soldiers to deploy in next month's battles.

  • Number three: Use Advanced Technology.

  • Thanks to the dozens of budgeting apps you can download for your phone, no one has to keep a checkbook longhand anymore.

  • This can be especially helpful for discretionary spending: now you can know right away whether you can afford that Weird Al album on vinyl.

  • So how you do know you're budgeting correctly?

  • Well, the most obvious answer is that you're less stressed.

  • Imagine enjoying a dinner out without worrying about whether or not you can afford it.

  • Imagine not holding your breath every time you check your account balance.

  • You'd be amazed how much you can improve your mood just by introducing more clarity and control into your finances.

  • Like a lot of good financial habits, the point of budgeting isn't to have more moneyit's to be happier with the money you have.

  • And that's our two cents!

  • We want to tell you about the new PBS Digital Studios series: "Say It Loud."

  • A celebration of Black History and culture and it's impact on how we live today.

  • Hosts Evelyn from "The Internets" and Azie Dungey, give you a comedic take on identity and pop culture. From Black pride movements to Black Twitter shenanigans.

  • Check out "Say It Loud" in the link in the description below.

Do you ever feel stressed about money?

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Budgeting Basics!

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    Mackenzie posted on 2019/12/09
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