How Do I Make A Budget And Stick To It?

Summary

In this segment, Sam discusses the importance of budgeting, especially for new parents. He advises creating a budget as a 'guardrail' to prevent overspending, not a 'straitjacket'. He suggests setting limits on categories like groceries and entertainment, with a clear 'why' behind these limits, such as providing a better life for a newborn. Sam recommends using the EveryDollar app to track expenses and emphasizes that a budget gives permission to spend within set limits, fostering a sense of control and purpose in financial planning.

Takeaways

• 👨‍👩‍👧 Congratulations on the new baby! It's a great motivator to start focusing on financial planning.
• 💼 A budget is not a straitjacket but a guardrail to keep financial decisions on track.
• 🧮 Start by estimating your spending on categories like groceries and entertainment, then adjust based on actual expenses.
• 🛒 Be aware that you likely spend more on groceries than you think, so consider increasing your initial budget for that category.
• 🎬 Set specific spending limits for each category, like $50 for entertainment, to help control overall spending.
• 💡 The reason for budgeting should be a 'why' that is meaningful, such as providing for your child's future.
• 🚫 A budget helps you say 'no' to unnecessary expenses and 'yes' to those that align with your financial goals.
• 📱 Use budgeting tools like the Every Dollar app to track and manage your spending throughout the month.
• 🤝 Ensure both you and your spouse are on the same page regarding the budget to maintain consistency and commitment.
• 🌟 Having a clear and noble financial goal, like ensuring a good life for your child, can make sticking to a budget easier and more rewarding.

Q & A

What is the main concern of Sam in the script?

Sam is concerned about his financial standing, especially after having a baby, and is looking for advice on how to create and stick to a budget.

What is the first step Sam should take in creating a budget?

The first step is to sit down with his wife and decide on the amount they want to spend in various categories such as groceries and entertainment.

Why does the speaker suggest increasing the grocery budget initially?

The speaker suggests increasing the grocery budget initially because most people underestimate their actual spending, and it's important to accurately reflect real expenses.

What is the purpose of setting a specific entertainment budget?

Setting a specific entertainment budget helps Sam and his wife prioritize their spending and align it with their bigger financial goals, such as getting out of debt and providing for their child.

What is the significance of having a 'good why' when creating a budget?

Having a 'good why' provides a compelling reason for sticking to the budget, making it easier to resist overspending and stay focused on the long-term goals.

How does the speaker describe the role of a budget in financial management?

The speaker describes a budget as a 'guardrail' that prevents one from going off track financially, rather than a straitjacket that restricts all spending.

What tool does the speaker recommend for tracking the budget?

The speaker recommends using the 'Every Dollar' app, which is free and can be set up in about 10 minutes to help track and manage the budget.

Why is it important for Sam and his wife to be on the same page regarding the budget?

Being on the same page ensures that both partners are working together towards the same financial goals, which is crucial for the success of the budget and maintaining harmony in their relationship.

How does the speaker suggest Sam should feel about the money they do spend within the budget?

The speaker suggests that Sam should feel permission to spend within the budgeted limits, without guilt or weirdness, because it aligns with their agreed-upon financial plan.

What is the ultimate goal of budgeting according to the speaker?

The ultimate goal of budgeting, as per the speaker, is to achieve a bigger, more noble goal than simply buying more things, such as creating a great life for the family and the new baby.