The Dreaded B-Word

What word popped in your head?

I was recently out to brunch with my girlfriends and I told them about this upcoming post and only one of them correctly guessed the “B- word”. Today we are going to talk about budgets. I would venture to guess that my one friend was able to correctly answer because she knows me and my financial nerdiness!!

I can’t think of many people who enjoy talking about budgets but I will try my best to make this a pleasant of a post. Before I dive into the various approaches to budgeting and tools out there to help, I want to start by emphasizing the importance of having a budget.

I equate not having a budget to driving cross-country without using a map or GPS. It would be nearly impossible to get to your finale destination without having a route mapped out. It would be just as difficult to grow your wealth or accomplish a financial goal without having an awareness of your spending habits. Understanding how you spend your money is as important as using a GPS when traveling to a new location.

Where to Start

A great place to start the budgeting exercise is with cash flow management. I promise this is simpler than it sounds! Cash flow management compares your monthly take home pay with monthly fixed expenses (i.e. rent/mortgage, car or student loan payments, insurance, utilities, automated savings, cell phone bill) to determine your “free cash flow” for the month. Free cash flow is what you have available to cover items like groceries, clothing and entertainment. These are categories that flexible (to an extent) and can change to ensure you are not living beyond your means.

You’ll notice that I treat automated savings as a fixed expense. I believe in paying yourself first and treating automated savings towards a financial goal as a non-negotiable fixed expense.

Example of cash flow management worksheet in Excel.

This exercise will look different for everyone but that end result is to understand how much free cash flow you have each month to allocate to these other categories and begin defining an appropriate amount to spend in each category. As an example, you may choose to allocate 50% of these funds towards your grocery bill, 20% towards entertainment, 10% to clothing and 20% towards vacation savings. And just like that you’ve started to create a budget!

Track Every Penny

For those of you who want a more robust approach to budgeting, I recommend the “Track Every Penny” approach. If the name didn’t already give it away, you assign every dollar of your income to an expense. The idea is at the end of each month, every dollar has a purpose from paying for rent to long-term savings in an investment account.

This approach is much more involved and takes time and patience to ensure every swipe of the credit/debit card is accounted for and applied towards an expense category. Some find it therapeutic going through receipts and capturing transactions in Excel while others opt for online assistance.

I personally fall in the camp of using online tools to help me keep track of my spending. The added benefit to using an online tool is that you can compare your category spending with preset budgets. It makes it very easy to see which categories you’ve overspent vs. meeting your budget. My go to online budgeting tool is I could go on for days about and how it’s helped provide awareness on my spending habits. This is not a sponsored post by, all opinions are always my own.

Advanced Budgeting

If you’ve already mastered the craft of cash flow management and have begun the tracking every penny approach to budgeting, then you are ready for the next step. If you truly have a good handle on your spending, you can begin to make strategic changes in your spending habits so they are in alignment with your values.

Have you ever heard of the Big Rocks of Life by Dr. Stephen Covey? If not, I encourage you to click through and give it a read. It’s a quick read but makes a powerful point on prioritizing the “big rocks” in your life. The same big rocks in your life often lend themselves to the big rocks in your financial budget.

I went through this exercise a few years ago and found it enlightening and have since allowed it to inform the way I live my life and approach my finances. There is no right or wrong answer to what goes on your big rocks but I’ve included a few examples of how a big rock could translate into a financial priority.

  • Family – savings for a home, college education, providing food on the table, etc.
  • Health – monthly gym memberships, workout classes, self-care, etc.
  • Charity – donations to charities, church, helping family members, etc.
  • Joy – saving for vacation, experiences or hobbies
  • Work – education expenses (debt repayment, masters classes, continuing education), professional wardrobe, future financial security.

Taking your budget to the next level starts with prioritizing the big rocks and allowing the other items in your budget to take second stage. At the end of the exercise your spending habits should be a reflection of the big rocks in your life.

I hope you feel empowered to tackle the “B-word” and create a budget for yourself or family that is a reflection of life you want to live. Comment below to share your big rocks or ask any budget related questions.