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What Is a Budget?

The word budget has gotten a bad rap over the years. And depending on your relationship with money, just the mention of the word could have you grabbing your sneakers and running for the hills.

Don’t worry, a budget is one of the best tools in your financial toolbox that can actually save you money and help you spend more freely.

So, put down those sneakers and settle in, because we’re going to share why you should be on a budget (every single month). Let’s start with the basics:

What Is a Budget?

A budget is a written plan for your money. Simple enough, right?

Well, even though it might sound simple, it’s often easier said than done. But when you commit to doing a written budget every single month on purpose, it actually gets easier and easier.

Growing up, you probably thought a budget was just your parents’ way of reining in your spending when you asked to go to the movies—multiple times a week. After all, “money doesn’t grow on trees, ya know.”  

Money

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Here’s the truth: A budget actually gives you permission to spend. Shocking, right? So, instead of seeing a budget as a list of what you can and can’t spend, you need to look at it as your game plan for the month—because spending every dollar you own and wondering where it all went is getting really old. A budget gives you the opportunity to make a plan and spend your money on the things you actually care about.

Pretty cool stuff, huh?  

Why Should I Budget?

Last year, most of the world experienced the harsh reality of what happens when the unexpected hits: job losses, living paycheck to paycheck, and a real need to have cash stowed away in an emergency fund. But new research from The State of Personal Finance study by Ramsey Solutions shows that 6 out of 10 people in America still don’t do a monthly budget. And of the 40% that are budgeting, one-third of them started in the past year.1

Listen: You work too dang hard for your money to just wonder where it all goes every single month. If that’s you, you’re not alone. We say this all the time, but 78% of Americans are living paycheck to paycheck.2 But you don’t have to live that way! When you get on a budget, you won’t have thoughts like, Why can’t I pay my freaking bills every month? I make too much to be this broke.

Remember that game plan we talked about earlier? It’s called a zero-based budget. With this type of budget, you give every single dollar a job to do so you know exactly where your money is going every single month. And when you stick to it, you’ll be meeting your money goals in no time. But more on this later.

It can take a few months to get used to budgeting. But once you get the hang of it, you’ll see why using a budget is so worth it. Plus, doing a budget doesn’t tell you not to spend. It actually gives you permission to spend on the things that matter the most—and to show your money who’s boss.

Guess what? We’ve got a free budgeting tool that will help you get on the right track with your money and financial goals. And according to research from Ramsey Solutions, EveryDollar helps the average household find $332 in the first month of their budget. Score!

Top 4 Budgeting Myths

All right, so you’ve probably heard plenty of excuses for why you can’t or shouldn’t budget. We have too. Let’s see if there’s any truth behind these four popular budget myths.

Budget Myth 1: Budgeters Don’t Have Fun or Buy Nice Things

Let’s go ahead and stamp a giant “false” on that one. Listen—budgeting doesn’t mean you never spend money. It means you plan for how you spend money so you can do it like a responsible adult. So, you budget for fun. But you should always budget for the things you need before all the things you want. See? A little business, a little fun.

Budget Myth 2: Budgeters Have to Be Good at Math

If your ACT math scores didn’t top the charts, that doesn’t mean you have an excuse to skip your monthly budget. Everyone needs to budget—no matter their school subject strengths or weaknesses. And there’s good news: If you don’t love math, there’s an app for that (and we know a good one). You can try out EveryDollar when you start a free trial of Ramsey+. By doing the math for you, Ramsey+ and EveryDollar help you take the stress and worry out of budgeting. Now there’s no excuse.

Budget Myth 3: Only People Struggling With Their Money Need a Budget

Want to know who needs a budget? Everyone.

Yup—you need a budget if you’re living paycheck to paycheck (with all your money going out as soon as it comes in). And you also need a budget if you have some savings, if you want to crush your goals quicker, if you’re in debt up to your eyeballs, or if you’ve never even looked at a credit card.

Seriously—everyone needs a budget. A budget helps you take control of your money, get on track with your money goals, punch debt in the teeth, and knock it out of your life forever. So, whether you’re struggling with or feeling pretty good about your finances—a budget is still for you.

Budget Myth 4: Budgeting Takes Too Much Time

First of all, you can’t afford not to spend time budgeting. Your financial success depends on it!

Secondly, remember that app we’ve been telling you about? EveryDollar saves you time too. That’s because one of the premium budgeting features it gives you inside of Ramsey+ is automatic bank transactions. Once you connect your bank to your budget, your transactions stream right in. Then you just have to drag and drop them to the right budget line. Budgeting does take some time (worth it). But it doesn’t have to take too much time (thanks to Ramsey+).

The Best Way to Budget

Zero-based budgeting is the proven method for budgeting. And like we shared earlier, a zero-based budget is when all your income minus all your expenses equals zero. When you use a zero-based budget, you give every dollar a name, a job and a purpose.

Here’s how it works: All the money going out should be the same amount as the money coming in. So, if you make $5,000 a month, you’re giving all $5,000 a job: paying bills, saving money, paying off debt, and living life! When you add in every source of income and then subtract every single expense, your budget should end up at zero.

Here’s an important callout: Your bank account should never hit zero. Keep a little buffer of about $100–300 in your checking account, depending on what works for you.

But your budget should hit zero every single month because you’re budgeting all those dollar bills. Every. Single. One. Anything that’s “extra” doesn’t stay extra. Put it to good use working for you—every last dollar of it. That’s how you get your money actions in line with your money goals.  

And guess what? It’s way easier to budget when you’ve got a budgeting tool. Not only that, but it’s way, way easier when that tool is mobile and built on the zero-based budgeting method.

That’s EveryDollar.

Budgeting can be hard and time-consuming. But it doesn’t have to be. Get the budget tool that helps you make real changes with your money—and your life! Start your free trial of Ramsey+ today so you can test-drive those premium EveryDollar features, save for emergencies, pay off debt, and build the financial future of your dreams.  

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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