A good budget is the foundation of any strong financial plan.
And that’s what Budget Ease is all about. Without a good budget that you can actually follow, your chances of succeeding at any financial goal are very slim. Budget Ease was designed to make budgeting as simple, painless, and accurate as possible, so you’ll have the foundation you need for financial success. Taking control of your money may seem like a huge undertaking, but if you follow the three principles of Budget Ease, you’ll be well on your way in no time. The three principles of budgeting are:
Our 3 core principles:
- Don’t spend money you don’t have
- Plan ahead for all expected expenses
- Build a cushion for the unexpected
Principle 1: Don’t spend money you don’t have.
I’m sure we’ve all bought stuff before when we really didn’t have the money (credit cards make it so darn easy!), but if you want to get out of debt, stay out of debt, and build your savings, you’re going to have to follow Principle 1. This requires some discipline, but it’s well worth the effort. Falling into the trap of credit card debt will always land you in a place you don’t want to be!
To enforce this principle, Budget Ease uses the envelope budgeting system. As you get paid, Budget Ease takes your income and divides it up into envelopes for spending and saving. That way every dollar has a place and, as long as there’s money in your envelopes, you know you’re not spending money you don’t have. This method also makes it easy to see how much money you have left that you can safely spend.
Principle 2: Plan ahead for all expected expenses.
Technically Principle 1 is the only principle you actually need. If you can simply go the rest of your life without ever spending money you don’t have, you’ll be set. But without careful planning, you’ll most likely end up violating Principle 1 when larger, rarer expenses pop up.
It’s probably not hard to list the bills you have to pay each month and plan for those, but there are a lot of other expenses that tend to get forgotten. Some bills may only need to be paid every three or six months (like car insurance). Some you only pay once a year (like property tax). You need to set aside room in your budget for these things, too.
But it’s not just infrequent bills that can be the problem. I have some shocking news for you: Christmas is on December 25th! Have you started setting aside money for all those gifts? Do you take a vacation each year? Is a big anniversary coming up? Is putting money aside for those things part of your budget?
We all have things like this that aren’t unexpected but often slip through the cracks when planning, causing us to spend money we don’t have. Take some time to really think through all the expenses you have throughout the year and figure out how much you need to set aside for them.
With Budget Ease, you can specify whether bills are paid every 3, 6, or 12 months (for things like insurance and taxes), or you can set up a savings envelope and start accumulating money each month (for things like Christmas or vacations). It may take some time, but once you’ve made room in your budget for all expected expenses, you’ll be in a much more stable place financially.
Principle 3: Build a cushion for the unexpected.
Even if you commit to stop spending money you don’t have and strategically plan ahead for known expenses, you’re still going to run into totally unforeseen costs. Maybe you’ll have unexpected medical bills when your kid breaks his arm (that happened to me last summer). Or maybe your car breaks down or the furnace quits working (both happened to me last year, too). There are many things that can go wrong and cost you money, so it’s important to set aside funds that can cover those totally unexpected expenses.
How much should you put aside? Well, there are differing opinions on that. One popular idea is Dave Ramsey’s concept that you should start with $1,000 in an emergency fund, with an ultimate goal of three months of living expenses. Any time you have to spend some of this, you need to adjust your budget to build the balance back to where it was before you removed the money.
One word of warning here: Be sure that these are truly unexpected expenses and not just things you forgot about. If you forgot something, it’s fine. That happens. But once you realize it, you need to adjust your budget to plan for the next time it happens.
Principle 1 is something you should strive to do immediately. Principles 2 and 3 are ones you will develop over time. Once you’re consistently following these three principles, you can start really tackling your debt or building your savings or retirement fund. When you’re ready for this step, you might want to consider Dave Ramsey’s Seven Baby Steps to Financial Peace or something similar.
Whatever path you choose, Budget Ease will provide the solid foundation of a powerfully simple budgeting system that will give you the footing you need to reach your financial goals!