Welcome to the “Budgeting Tips” series! These tips have proven extremely helpful in getting my own budget in order, and I’m confident they can help you too.
Budgeting Tip #2: Income – Outgo = Exactly Zero
There is one fundamental rule of money we all must live by: “To have OUTGO, you must have INCOME.” This rule is understood very quickly when one begins to prepare a budget! In fact, there are few things that will make a person value a dollar as much as preparing a monthly budget. When you realize that money is limited, it causes one to focus on becoming a better financial manager. While preparing my first budget, I quickly realized I was documenting insanity! It became abundantly clear that I was spending far more than my income. “No wonder I’m feeling so much stress!” I thought to myself.
In order to get a budget to work, we must recognize this simple formula: “Income – Outgo = Exactly Zero” You can’t continually spend more you make and expect to prosper. This is where Budgeting Tip #1 comes into play – we must give every dollar a name. In fact, “outgo” should also include giving, saving, and investing. Preparing a budget where you give every dollar a name allows you prioritize the items which are most important to your financial success: Giving, Saving, and Investing! By ensuring the monthly budget balances to Exactly Zero, you are positioning yourself to prosper. It allows you to know that your financial obligations will be met. It gives you control of your financial future.
I encourage you to download one of our free budget tools and begin the challenge of balancing your Income and Outgo so that it equals Exactly Zero. It might not be easy at first, but living without a budget is much more difficult!
NOTE: This post is part of the “Budgeting Tips” series. Click HERE to read other posts in the series.