3 Ways Budgeting Changed My Life

From the day I graduated college to starting my first job, my personal finances took the backburner. I was excited to finally have achieved something meaningful, at least that’s what I thought at the time, but it would take me years to recover from a summer full of bad financial decisions.

At 22, I started my adult life with about $23,000 of student loan debt, and since I had “earned it” I got myself a new Honda Civic to prepare for my move to Washington D.C. I continued spending before I even got my first paycheck by buying expensive electronics, a new wardrobe, and new furniture bringing my debt to well over $50,000.

A few months into my first job I had the wake-up call I needed, realizing that work was not bringing me the fulfillment I had hoped it would. It was supposed to be the “dream job” but I felt trapped. I created an exit strategy to change my career path, but the only way I could get out was to start budgeting.

Sure, at first budgeting may seem like a dreadful and daunting practice and so complicated you never begin since you don't know where to start. But, by budgeting and learning about personal finance I was able to escape the rat race and, more importantly, open my eyes to a new way of living.

Here are three big ways that budgeting changed my life forever:

1. Paid off $50,000 of debt in one year — By sticking to my budget, cutting expenses, and living frugally, I was able to get out of debt a lot faster than I had previously thought. Every dollar was given a job and that job was to pay my debt. I ended up not needing my car as I could take the Metro to work so I sold it. By making a few small life changes and knowing exactly where my money went each month I was able to become debt-free in one year.
2. Stopped living paycheck to paycheck — After paying off all my debt, I realized that my expenses were much lower than my income so I could start saving more each month. I was no longer living paycheck to paycheck so I increased my retirement contributions, created my first emergency fund, and started to learn how to invest. Once I stopped living paycheck to paycheck I felt confident enough to leave my job and pursue entrepreneurship full-time.
3. Saved a 12-month emergency fund — Without budgeting, I would have been in a world of hurt right now. Thankfully my businesses have been successful enough to allow me to build an emergency fund to cover an entire year of living expenses. Like millions around the world, my income has been impacted due to Coronavirus but knowing that I can adjust my budget and pull from my emergency fund, I’ll be able to weather the storm of this pandemic. As they say, cash is king!

What is my favorite budgeting tool? I am a big fan of YNAB (You Need a Budget). This is the tool I’ve used for the past five years to manage my finances and it’s completely changed how I think about money. The best part is that it only takes me one hour each month to manage my finances. When you give every dollar job you’d be surprised what you can achieve.

If you aren’t budgeting, now is a great time to get started and take action. Start by tracking each expense you make for the next 30 days. What you’ll find might shock you, but you can use this data to build your very first budget. YNAB can do this automatically for you if you sync your bank accounts and categorize your transactions.

According to Bankrate, 51% of millennials do not have a budget at all. Budgeting is something you should be doing every month no matter where you are at financially or what age group you belong to. Without a budget to track your expenses, you won’t know where your money is going, ultimately making it much harder to achieve other financial goals like buying a house, saving for retirement, and more.

Due to increasing inequality in America, I know not everyone has the privilege to save money or pay off debt as I did, but many do, and you have the power to change your financial future just by tracking your spending each month. What are you waiting for?

Are You Stuck and Need Expert Help?

I know it can be hard to know where to start or what to do first so I am here to help you. As a financial coach, one of the services I offer is budgeting and tracking expenses. This is where I start with any new client who is trying to better their finances. I will meet with you to create a budget, analyze your spending habits, and provide you with personalized coaching to transform your finances. You’ll leave feeling confident knowing exactly where your money goes each month!

If you’re interested please schedule a free consult on my website and we can see if we are a good fit for each other. You can also email me with any questions at info@organizedbyjosh.com.

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