Budgeting - A Realistic Approach to Financial Planning

If you're like me at all, there is a side of you that hears the word budget and cringes. To me it always meant that you couldn't afford it. I remember asking for things growing up and being told that we "couldn't afford it on our budget." However, I do completely see the other side of the budgeting paradigm now that I have had a crack at making myself stay afloat financially. If you are not budgeting expenses, then you may never gain the freedom of having your money work for you instead of how most people consider budgeting to be more restricting. It allows you to plan for large trips and life's unexpected events.

The idea of budgeting may seem daunting to you like it does to me. It's not necessarily that it is hard to figure out numerically, it is hard to face the reality of your financial situation when you are in ruins. For example, I can't pay my student loan payment right now. I am way past due. I know that with my current income, no matter how I budget it, I will not be able to afford those payments. I know that before I even start following a budget I am almost "doomed" in areas like that.

To combat those ideas that my budget "will never be enough", I have decided to take up a second job. I have an interview on Tuesday for a seasonal job at the Victoria's Secret call center. It's not crazy exciting but given my entire financial picture, it is motivating to see my income expand (assuming I get it). However, in the mean time what I am going to be doing is making a list of what I spend now. In other words, I am going to be making a money log of things I buy to better help me understand what my budget is now.

Liz Pulliam Weston in her article at MSN Money entitled "How to build your first budget" uses the 60% solution. What that strategy involves is allotting a certain percentage of income to certain categories.
The 60% Solution allocation:
60% of your pretax dollars goes to your essential living expenses like food, shelter, taxes
10% to retirement savings
10% to emergency savings (or debt payment)
10% to short term savings or irregular expenses (holidays and car repairs
10% to fun money

Now given my apprehension for tackling my debt with my current income and the strategy given above, I find the most interesting one to be that 10% chunk going towards emergency savings. The reason why it intrigues me is because it's either emergency savings or debt payment. Those two things don't normally share the same budget line - at least in my head.

I will be writing more on progress on budgeting as we go along. First though, I am going to start writing down everything I spend as I spend it, down to every penny.

Do you keep a budget? How accurate do you stay to it? Does it provide you financial stability? Is there a chance at becoming rich with your budget?

Til tomorrow,

Josh