Who hasn't experienced it, dealing with your finances can be stressful and challenging,
especially if you don't like dealing with numbers. That's why only about 47% of Americans
have a budget or use a budget method to track their finances. Yet a budget is the most effective
and fundamental tool for getting your finances under control and actually achieving your
financial goals. Without an accurate plan, your money will flow in any direction and
you'll end up wondering where all your money went at the end of the month. That's exactly
why we've brought you a budget method that's quick and easy to use and only needs to be
set up once, and from then on only requires tweaks as needed. Just right for those who
hate budgeting. And before we dive into the topic : Hello
and welcome back to our channel ! And if you are new here : We are the finance nerds and
on this channel we are helping hardworking people like you to get more out of your hard
earned money by showing you how to use your money in the most effective way. Remember
to give this video a thumbs up at the end, if you got value out of it and now let’s
start ! I have talked about budgeting on this channel
many times now and have presented many budgeting methods, yet there is no perfect budgeting
method, at least there is no method for everyone. A budget is always an individual thing that
everyone has to set up for themselves. It is also logical, because everyone is in a
different life situation and has different priorities. Therefore, today it’s more about
the basic concept of a budget, with which everyone can then create a budget tailored
specifically to themself. The goal is to set up this budget once and then only use it and
make optimizations as needed. This way you only have to go through the headache once
and can enjoy the benefits from then on. Because basically budgeting isn't always fun, it is
however one of the most important things you can do to get control of your finances. It's
your foundation and sets the direction and defines your financial goals or the path to
get there. Now let's get into the budgeting method, for those who hate budgeting.
The foundation of this budget method is "zero-based budgeting". If it doesn't mean anything to
you yet, the goal of this method is to give every cent of your monthly income a meaning
and to "spend" your entire monthly salary. This makes the concept much easier, because
you already know that every cent will have a meaning and that it will flow in one direction.
The formula behind this is : income minus expenses ( + savings ) = 0.
Now it is a matter of calculating your monthly income and then equating your expenses and
savings to your income. For this I will use an example :
Through your main job you earn let's say 3000$ and on the side you have a small online store
that gives you 350$ monthly profit. What’s very important is: We are talking about your
net income. Now come your expenses and the goal should
be to get to your monthly income. Housing : 1000$
Savings 500$ Debt Payment : 500$
Insurance : 110$ Utilities : 250$
Groceries : 400$ Fun : 190$
Clothing : 100$ Investing : 300$
Your expenses belong of course also positions like saving, debt payment or also investing.
Of course, you will have to invest a lot of time and thought and make adjustments, but
remember: it's all about doing it once and then reaping the rewards.
Now you have a very good overview of your expenses and can already take control. But
now you also have to steer your money, let's say, in the right direction and divide it
exactly between wants and needs. For this we use the 50-30-20 method. The basic idea
is to divide your income into 3 categories: 50% needs, 30% wants and 20% savings and debt
payments. Think back to our example:
We had a total net income of 3350$ and this income we should now divide into 50% needs,
30% wants and 20% savings and debt payments. Of course, it is important to understand that
these percentages are only a guide and everyone must decide individually how to divide their
income. I just wanted to show that you should do this.
The 50% needs include : Housing, Insurance, Groceries, Clothing, Utilities.
To the 30% wants belong : Fun
20% includes : Investing, Saving and Debt Payment.
If you have done the math, you will notice that the percentages do not fit here either,
and that's okay, it won't be the case for you either. For example, one person has more
debts to pay and therefore can not save so much, the other has no debts at all but, for
example, a family of 6, so he has a higher rent.
It can be that easy to get control of your finances. Give every cent a meaning and see
where and how much money is spent and then restructure your finances based on percentages.
It takes time and energy, but once done you don't have to worry about it until you want
to make changes and of course you should track that you are sticking to your budget.
If you enjoyed the video and now want to know more about how to take control of your finances,
click on the video to the right or check out the video description. There you will find
more videos and resources to help you have more money at the end of the month.
And remember to hit the like button if you are willing to take control of your finances.
We hope to see you in the next video!