How to make a budget

Transcript

(SUPER: 1. WHAT IS A BUDGET?)

KAMEREN: The way I define a budget, it’s a priority list for your lifestyle. It’s not necessarily a “Stop Doing” list or a “Here’s what I’m going to sacrifice list.” It’s more of a gauge to determine whether or not your actions match what you say is important for you and your family.

ERIC: Yeah, absolutely, I agree. I think it’s just a game plan for your money. So if you have a strong budget, it’s a way to tell your money where to go rather than wondering where it went.

TONYA: Yeah, a budget shouldn’t prevent you from spending, it just shows you how to spend your money properly so that you’re accomplishing your goals.

ERIC: Right.

TONYA: Which we’ll dig into a little later. And so, most people, you know, the thought of budgeting confuses them so let’s say over a high-level view, how do you create a budget?

ERIC: You add up all your expenses. You subtract them from your income. And what you’re left with is money for your goals, right? So that’s a budget -- income minus what is going out, your expenses equals what’s left over.

KAMEREN: Yeah, that’s the simplest way to put it. When you say how do you create a budget? I would probably start with -- you know, I’d probably work backwards and do it. Start with what my goals are, what do I want to accomplish? And let that, you know, be my priority list. And then apply what Eric is saying about your expenses and your income.

TONYA: Yeah, definitely. And you guys work with people every day and I’m sure that you see quite a few challenges and barriers to people living within their budget. So what are a few obstacles that you think people face when it comes to budgeting?

KAMEREN: You know, not to sound like a broken record, but one of the first things I hear is “Let’s review my budget.” And I say, “Okay, let’s start with your goals and what you want to accomplish.” And they say, “Okay, Kameren, I don’t want to do all that. I’ll get to that later on tonight. I just want to get to categorizing and looking at my expenses and then, you know, allocating money.” And that's one of the challenges. You can’t skip setting your goals, whether they’re one-year, two-year, three-year, whatever they are. Setting your goals is creating a budget. Those things are one and the same.

ERIC: And why is that important, right? It’s because your goals ultimately are the things you’re going to look to when you’re having a hard time sticking to your budget, right? When you want to go out to dinner with your friends, but you know that your dining out budget is growing thinner and thinner, right? So the goals are what are going to keep you motivated to succeed and stick to your budget. So I agree with you entirely, it’s important to start there. 

KAMEREN: Right.

TONYA: Absolutely.

KAMEREN: And once you hit your one-year goal, you hit your two-year goal, you hit your three-year goal, after that we come back and say, “Okay, you said you wanted to buy a house next year. Then we start putting money towards the house. You say you want to go on spring break to South Beach next year? All right, good, now we start putting money into it.” That’s how we start the process and start allocating money towards your goals, which creates your budget.

TONYA: Absolutely, so basically, take your income, subtract expenses, that’s primarily your budget. And then the money you have leftover, that’s for your goals.

ERIC: That’s right.

Tonya: So we’ve established what a budget is and how to create one.  Let’s take a look at what we’ve learned…

(KEY TAKEAWAYS BULLETED WITH SUPER ON TV SCREEN)