Budgets can be so confusing.

It's all spreadsheets and columns and numbers.

And why does this even matter?

Hi, I'm Nico Gargiulo.

And today on Adulting, we're talking about budgets.

[music playing] Budgets can be intimidating.

They can be challenging to create, tough to stick to, and they can make us feel bad if we go over what we owe in our categories.

But they don't have to be these things.

And if we can create one that works for us, a budget can be an incredibly helpful tool.

[music playing] Budgets don't just keep track of our money.

A good budget is a tool that will help us achieve our financial goals.

The purpose of a budget is to help us save and spend our money the way that we want.

Having a budget and sticking to it doesn't mean we're being cheap.

It means we're taking control of our finances.

Budgets help us to do this by giving structure to our day-to-day and month-to-month spending.

Think of your financial wellness as a ladder.

To achieve your financial goals, you need to be able to climb the ladder.

Having a budget is the first step on that ladder.

[music playing] OK, so how do we actually make one of these things?

When creating a budget, keep in mind that it should be two things-- a plan and a tool.

As a plan, a budget will help us see the top of the ladder, our overall financial goals.

As a tool, a budget will help us climb the ladder to get there.

Remember, a budget should be both of these things to be really effective.

Without a tool, a plan is difficult to achieve.

And without a plan, a budget is just a way of tracking your spending.

So to climb the ladder, we need a budget to be both.

[music playing] So how do we come up with a plan?

First, we need to figure out our goal.

What is the top step of our ladder?

What are we climbing towards?

This could be many different things and will be unique to each of us.

We might want to save for a big purchase like a car or a house, or we might want to put money away for retirement.

Whatever our goal is, the first step to creating a budget is identifying what it is we want to achieve.

[music playing] OK, so we know our goal.

The top of the ladder is in sight, but how do we get there?

When creating a budget, it's important to do what works for you.

Do you loathe Excel?

Then don't use it.

There are a number of budgeting apps and programs available.

Don't like tracking things electronically?

Still not a problem.

You can find many different paper budgets and journals.

Each of these, whether paper or digital, will walk you through entering your income and expenses so you can begin using your budget as a tool to achieve your financial plan.

[music playing] OK, so I have my plan, and I found my tool.

Now what?

Now you use it.

When tracking spending, it's better to be proactive than reactive.

Track your expenses each week so you can evaluate how you are doing and make changes to your spending if you aren't staying on track.

That way, if you are going over somewhere, you can catch it before it becomes an issue.

If you're only tracking your spending once a month, you will be reacting to what has already happened.

If you're over in a category, there isn't much you can do other than be disappointed in yourself that you didn't stick to your budget.

[music playing] Sticking to a budget can be challenging, and research shows that when people fail once, they often don't try again.

So don't let this be you.

Set yourself up for small wins by identifying your wants and needs.

It's important to be realistic.

Be flexible when evaluating your spending and your budget.

Make changes where they're needed.

And remember, a budget is your plan and your tool, so it always needs to work for you.

A budget shouldn't be set in stone, it should change and adjust with your life and goals.

[music playing] We've talked about a lot today, so let's recap.

First, budgets don't just keep track of our money.

A good budget will help us achieve our financial goals.

Second, a budget should be a plan and a tool.

If it's not both, it won't help us climb our financial ladder.

Third, do what works for you.

Find a budget app or journal that you like and use that.

And last, be realistic but flexible.

Sticking to a budget can be a challenge.

Be honest with yourself and make a change if something isn't working.

I'm Nico Gargiulo.

Thanks for joining us on this episode of Adulting.

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