Budgeting
Budget (noun)
an estimate of income and expenditure for a set period of time.
A budget is your financial road map. Budgeting reveals where every single dollar down to the cent is being spent. Being able to visualize your income, expenses, and savings, makes it easier to execute your financial goals. Having the discipline to budget, track, and monitor your spending brings clarity to your financial picture. Your budget will become a living document that must be updated with all of life changes.
Expense (noun)
the cost required for something; the money spent on something.
Expenses consist of all bills, liabilities, allowances, and or any cost you incur monthly. These items are coming out of your pocket monthly for rent/mortgage, gas, food, phone bill, car payment, credit card payment, insurance (car, home or rental, life, etc), daycare, savings, personal spending, or emergency fund. Itemizing each expense and the cost will allow you to see how much money is going out each month. The goal is to keep your expenses lower than your income. If your expenses are more than your income than your operating in the red/negative. You want to be in the green so you know that you can save for you future and legacy. Your only as rich as your expenses allow you to be.
Income (noun)
money received, especially on a regular basis, for work or through investments.
For you budget you want to track income that you make and bring home (after taxes are taking out) monthly. You have a job that you collect a check from at least monthly from, that’s your income. If you have a part-time job, side hustle, or a hobby that pays, then that’s more income to account for. Knowing how much money you are going to bring home monthly is a critical to your personal budget. Having more income than expenses is key. The more steams of income you have, the more financially secure you can become. Millionaires have an average of three or more streams of income.
Income types:
Earned- This is income that you actively work for whether it’s 40 hours a week at your job or money that you are for your time, service, or goods. This income can come once a year, sporadically, or weekly, monthly, etc. This is income that you work for.
Passive- This is income that you receive whether your sleep, retire, or do absolutely. nothing. This can be rental income from properties you own, royalties from music or acting, Passive income also consist of investment income like from a business franchise, or your investment portfolio which is our next source of income.
Portfolio- This is income that comes from investments, including dividends, interest, royalties, and capital gains. This income from your stocks, bonds, 401 K, pension, annuity, or any other investment coming from your portfolio.
Benefits of Budgeting
Allows you to organize your finances
Let’s you track your spending, savings, and EMERGENCY funds
Shows and brings clarity to all your debts
Increases your financial intelligence and confidence
Aligns your priorities and what’s most important in your life
Reduces your Stress