by Jillian Beirne Davi
Six years ago I was depressed, broke and deeply in debt. I had nowhere to turn. At the time, there was no such thing as a “Money Coach” (that I knew of…). But let me tell you, if that person existed, I would have hired them on the spot to help me.
Instead, I had to figure it out on my own. And it took such a long time to get into the groove of turning my finances around and I made many mistakes along the way. Eventually, though, I paid back every cent I owed. But that wasn’t the big accomplishment.
The big accomplishment was feeling like for the first time, I was in control of my money. Not the other way around. It was a great feeling to be debt-free with abundant savings, but most importantly I knew that no matter what amount of money came in, I could manage it well, be generous with others and still have money left over for myself.
One of the best tools I used was a Spending Plan (aka “Budget”) that helped me plan my finances out in advance. Here’s how it works.
The Dirty – B Word: How to Create a Budget That Works!
In order to get a hold of your finances, the first step is to know your numbers. You must create a Balanced Budget that you can realistically stick to long term — a budget you love. (Yes! It’s absolutely possible to love your budget. Trust me on this. I had one client call it “The Magical Spreadsheet” for a reason.)
The first thing you want to understand is that a budget does not mean deprivation. In fact, don’t call it a budget at all. Call it a “Spending Plan.” The truth is, once you receive your paycheck, it all gets “spent” somewhere, even if you’re saving it. So the plan just tells you exactly WHAT to do with the dollars that come on Pay Day so that you feel good for the next two weeks.
The best way to create a budget you love is to make sure that every time you get paid, you divide your paycheck into three buckets. The Wealth Bucket, the Living Expenses Bucket and the Play Money Bucket.
Wealth Bucket: These are the money habits that set you up for wealth long term – becoming debt free, saving money and making generosity a habit. This bucket makes the practice of Wealth Consciousness a habit in your life. Here are the three things that go in this bucket:
Debt Repayment: Credit card payments, student loans, personal loans, car notes are all examples of what goes in this bucket.
Personal Long Term Savings: Like attract like in the money game. When you have personal savings, you feel more at ease. When you feel more at ease, it gets you out of survival mode thinking. When you are at ease, you attract more opportunities for new money to come into your life. Personal savings is a must.
Tithing/Charitable Giving: You also want to include some sort of regular tithing or charitable giving in this bucket. Why? Because this keeps the energy of money circulating in your life.
Living Expenses Bucket: Fixed living expenses go here. Fixed living expenses are the predictable expenses that do not change month to month. Rent or mortgage payments, transportation costs, utilities, cell phone bills, cable, any recurring subscriptions, groceries are all examples of what goes in this bucket. These are your fixed costs of living.
Play Money Bucket: This is everything else. I believe you must have a chunk of money left over from every paycheck that you set aside to simply ENJOY. Money is a tool for you to live well. For many women that are paying down debt, struggling to stay afloat, or have little savings, this bucket is the hardest to understand. They feel guilty: how can I have Play Money if I’m so deeply in debt? Shouldn’t every penny go towards debt or savings?
I believe the answer is no. Deprivation is not a long term strategy to achieving your money goals. If you deprive yourself for too long, you will begin to feel resentful and will rebel against your own rules
So, it’s important to make sure that you have some fun with your funds, too. Reward yourself often with things that you love and that make you feel good. This is the definition of good self-case. If you do this, you’re less likely to go into “deprivation” mode with yourself or with others.
Quick coach’s tip: Just go one paycheck at a time. Yep! I’m advocating living paycheck to paycheck at first. Create your budget and then focus on sticking to it for one pay period only. If you accomplish this, then reward yourself on your next Pay Day with something that makes you feel really good.
This doesn’t have to be expensive, but it must be something that really feeds your soul (For me, it was taking myself out to a sushi lunch on pay day and buying myself a brand new book a few days later). Build meaningful rewards into your plan to keep you going!