If this is your first time visiting Centsability to Wealth you may want to see what we are about , read about me, or read our introductory post.

As I mentioned in yesterdays post about budgets, many of you have been very interested in the topic.  A few of you have wanted to know what I use for my personal budget.  So today I am going to walk you through exactly how my budget works.

First let me say that the budget I use is not anything special.  It’s actually pretty plain and boring.  But it works for me and that is the biggest key to a budget or any other personal finance concept.  It has to work for you.  Warren Buffet himself could come to your house and build you a budget in front of your face, but if it is not something you will follow, it’s worthless.  So as you read about my budget, keep in mind it is not necessarily the budget I recommend for you.

Here is a look at my budget, followed by my keys to following it:

- Monthly income (After 401 (k) and benefits deductions): $2,300

- Fixed monthly expenses: $1,300

     - Rent (including cable, internet, electric, water etc.): $250

     - Car: $300

     - Student loans: $250

     - Debt repayment (was my credit card, now it is a personal loan being repaid): $500

Fixed amount of money going towards monthly savings: $500

     - Emergency fund savings: $300

     - Moving expenses savings (what we are saving for our upcoming move): $200

Monthly discretionary money: $500

   - Discretionary money is the money that can be used on anything I choose.  It should be noted that some necessary expenses are paid for out of the discretionary money, such as groceries and gas.  But basically I have $500 to do with what I please each month.  If I spend too much on going out to eat or going to the movies, etc, I won’t be able to buy groceries.

How do I make sure I stick with this budget?

1. Automate it as much as possible.

Wherever I can automate an expense or savings amount, I do.  My student loan payments are automated.  My savings account contributions are automated.  When I was paying off my credit card that was automated.

By keeping these things automated I ensure that they are both getting paid on time and are getting priority over discretionary spending.  That money is being taken out of my account whether I want it to be or not, so I better make sure I have enough in there.

2. It allows me guilt free spending.

When I first started getting control of my finances, I would freak out about every penny I spent.  Did I really need that one dollar candy bar?  It was driving me crazy.

Now that I have a set amount of money devoted to my discretionary spending, I can spend on the things I want guilt free.  You still have to set priorities, as the fund is certainly not limitless, but I no longer have to sweat the little stuff I want to buy.

3. It’s not too strict.

Some people need and thrive with an extremely strict budget that decides where every penny will go every month.  I am not one of those people.  Having a little bit of freedom with my money, while also sticking to a general schedule with it, is what works best for me.

4. I constantly adjust it as needed.

A lot of my expenses and savings goals are changing frequently.  When I recently paid off my credit card, I had to decide what to do with the $500 a month that was going towards that debt.  I decided to use it to pay off my personal loan.  In a few months that will be paid off and I will again have to decide where to put that money.

Keeping it updated like this not only keeps it realistic, but also keeps it interesting for me.  Deciding where to put $500 extra is exciting.  And when you make it fun, it is much easier to follow your budget.

There is a quick look at my monthly budget.  It is what works best for me (at least at this point in time), but as I have said many times already, it may not be what works for you.  You may very well want a more organized budget that sets a certain amount of money for gas and groceries each month.  You may want less structure or less automation.  It is completely up to you and my best advice would be to experiment with different approaches and see for yourself which style you like best.

Budgets are an excellent (and probably necessary) tool for improving your finances.  Whether you want to give my style a try or go with a completely different approach, the important thing is that you get started.

Please continue sending any questions, suggestions and story tips to centsabilitytowealth@gmail.com.

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